What is a tax deferred plan for employees?

This a retirement plan that you can choose to have amounts withheld from your earnings and the amounts will not reported in your gross wages in box 1 of the W-2 tax form and would not be subject to income tax until in a future year once you are over the age of 55 or 59 1/2 when you would start taking distributions from your retirement plan.

The amounts will still be subject to the social security and medicare taxes for the year.

Any nonqualified distribution before the above age limits could be subject to the 10% early withdrawal penalty unless you meet one of the exceptions to the early withdrawal penalty.